PRDV201: Accounting Principles I

Unit 7: Long-Term Intangible Asset ReportingIn Unit 6, you learned about tangible assets or items that have a
“physical” presence. Tangible assets, however, are not the only types
of assets that it may hold rights to, or own. Copyrights, trademarks,
and patents are types of “intangible assets” that are highly valuable
though they cannot be physically held or accessed.

In this unit, you will also learn about mergers, acquisitions, and
goodwill – another type of intangible asset that is also recorded on
financial statements. For example, a company may pay more than the book
value to acquire another company. Imagine giving a waiter a 200% tip
for the outstanding service he or she provided. This is similar to the
concept of goodwill that many companies follow when buying other
companies. You will learn more about goodwill, why companies extend
this courtesy, and how this transaction is recorded in accordance with
accounting principles.

As you work through this unit, be sure to focus on the difference
between tangible and intangible assets. Be particularly mindful of the
different ways incremental losses are rectified and recorded on
financial statements.

Unit 7 Time Advisory
This unit should take approximately 3 hours to complete.

☐ Subunit 7.1: 2.25 hours

☐ Subunit 7.2: 0.75 hours

Unit7 Learning Outcomes
Upon successful completion of this unit, the student will be able to:
- Differentiate between intangible and tangible long-term assets.
- Explain how and why cost capitalization is used for intangible
assets.
- Identify examples of identified intangible assets.
- Describe definite-life and indefinite-life intangible assets and how
they are recorded on financial statements.
- Describe goodwill, and discuss its purpose.

Instructions: If you have not already saved this document to your
desktop, please click on the link above to download the PDF. Read
the section titled “Intangible Assets” on pages 492–497. As you
read, take notes on what intangible assets are and how they differ
from general assets. By the end of this reading, you should be able
to name several examples of intangible assets that a company may
own.
Reading this chapter and taking notes should take approximately 30
minutes.
Terms of Use: The book above is released under a [Creative Commons
Attribution-Non-Commercial-Share-Alike License
3.0](http://creativecommons.org/licenses/by-nc-sa/3.0/). It is
attributed to James Don Edwards and Roger H. Hermanson, and the
original version can be found
[here](http://dl.dropbox.com/u/31779972/Accounting%20Principles%20Vol.%201.pdf).

Instructions: Please click on the link above and watch the video
lecture, which details the difference between depreciation and
amortization. By the end of this lecture, you should be able to
calculate straight-line amortization and distinguish when
depreciation and amortization is used in business settings.
Watching this lecture and taking notes should take approximately 15
minutes.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Please click on the link above and read the
“Intangibles” section of this chapter. As you read, take notes on
how the differences between definite life and indefinite life
intangible assets and how they are handled in terms of recording
amortization.
Reading this chapter and taking notes should take approximately 15
minutes.
Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Please click on the link above and carefully read the
directions before completing the worksheet. Calculate the
straight-line amortization for the given entries, where appropriate.
If you have difficulty completing the worksheet, refer back to the
lectures and readings assigned below subunit 7.1.

Reviewing your previous readings and completing this worksheet
should take approximately 30 minutes.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Please click on the link above and carefully read the
directions before completing the worksheet. Calculate the
straight-line amortization for the given entries, where appropriate.
If you have difficulty completing the worksheet, refer back to the
lectures and readings assigned in subunit 7.1.

Reviewing your previous readings and completing this worksheet
should take approximately 15 minutes.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: If you have not already saved this document to your
computer, please click on the link above to download the PDF. Read
the section titled “Intangible Assets,” specifically the section
with topic heading “goodwill” on pages 497–499. As you read, take
notes on what type of asset goodwill is and how it is defined and
calculated. By the end of this reading, you should be able to
define goodwill and explain why a company would extend this when
purchasing another company.
Reading this chapter and taking notes should take approximately 10
minutes.
Terms of Use: The book above is released under a [Creative Commons
Attribution-Non-Commercial-Share-Alike License
3.0](http://creativecommons.org/licenses/by-nc-sa/3.0/). It is
attributed to James Don Edwards and Roger H. Hermanson, and the
original version can be found
[here](http://dl.dropbox.com/u/31779972/Accounting%20Principles%20Vol.%201.pdf).

Instructions: Please click on the link above and watch the video
lecture, which details the specifics of goodwill, how to calculate
goodwill, and how goodwill impairment can be harmful for a company.
By the end of this lecture, you should be able to define goodwill
impairment and describe how it is handled according to accounting
rules. Please note that the money references in the video are in
United Kingdom denominations. This should not change the
understanding of the material. Pay close attention to the
mathematical calculations that are done as opposed to the currency
that is used.

Watching this lecture and taking notes should take approximately 15
minutes.

Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

Instructions: Please click on the link above and scroll down to
section 11.2. Intangible assets are not physical in nature and
include such items as copyrights, patents, trademarks, good will,
brand recognition, etc.
Reading this section and note taking should take you approximately
20 minutes to complete.
Terms of Use: The text was adapted by The Saylor Foundation under a
[Creative Commons Attribution-NonCommercial-ShareAlike 3.0
License](http://creativecommons.org/licenses/by-nc-sa/3.0/) without
attribution as requested by the work's original creator or licensee.